Brent crude rebounded above $123 on Friday after a sharp sell off the previous session, as rising tensions between Iran and the West fuelled an oil rally that has forced Western leaders to prepare a release of their strategic oil reserves.

Brent crude rose 55 cents to $123.15 a barrel by 0302 GMT, after settling down nearly $2 the previous session following a Reuters report that Britian and the United States were preparing to tap into its oil reserves.

U.S. crude climbed 49 cents to $105.60 a barrel.

"We think that prices probably will continue to grind higher as we get closer to the sanctions deadline," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

The sanctions vice was tightening on Iran, cutting it out of key global financial networks, but Tehran was taking urgent steps to withstand the pressure over a nuclear programme the West suspects was intended to produce bombs.

New Western sanctions, due to come into effect within a few months, were aimed at further isolating Iran by banning its oil shipments to Europe and prohibiting financial institutions from making oil transactions with the OPEC producer's central bank.

The sanctions have helped boost Brent crude oil prices by nearly 14% so far this year, stoking fears that higher fuel prices could derail economic growth in the United States.

Reuters reported on Thursday that Britain had agreed to cooperate with the United States in releasing reserves in an effort to halt rising oil prices, but volumes and exact timelines have not yet been determined, sources said.

"Now that the seed of a strategic crude oil release has been planted in traders' minds, this may act to impose an imaginary cap on the price of crude with traders wary of taking long positions at elevated prices should the coordinated release come to fruition down the track," said Tim Waterer, senior forex dealer at CMC Markets.

Washington could be tempted to tap the 727-million-barrel U.S. SPR as retail gasoline prices have surged to their highest level ever for mid-March, near $3.80 a gallon, drawing consumer ire during a presidential election year.

Whether you are a Peak Oil advocate or not, the issue with oil is clearly one of supply and capacity right now. In an excellent recent article entitled ‘Understanding The New Price Of Oil’ Gregor McDonald outlined just why supply is now primary:

Supply, and the recognition of supply, are now the dominant factor in the oil price. A point so obvious, it hardly seems worth making. However, the developed world is still largely operating on the classical economic view that higher prices will make new oil resources available. That is true. But, it’s just not true in the way most anticipate.

While higher prices have brought on new supply, these resources have been slow to develop, are more difficult to extract, and generally flow at lower rates of production. As the older oil fields of the world decline, the price of oil must reflect the economics of this new tranche of oil resources.

There are no vast, new supplies of oil that will come online in 2013, 2014, and 2015 at the scale to negate existing global declines. During the entire time that global oil supply has been held at a ceiling of 74 mbpd, since 2005, a lot of new production in the Americas and Africa especially has come online.

But it has not been enough to increase total world supply. And the price of oil has finally started to price in that new reality.

...we really should take a look at the theory that we went into Iraq to get its oil. A ride up “Hubbert’s Peak” will allow a clearer view of the real topic of this chapter: the geo-politics of petroleum.

No Peaking: The Hubbert Humbug

On March 7, 1956, geologist M. King Hubbert presented a research paper that would, a half century later, become the New Gospel of Internet Economics, the Missing Link that would Explain It All from the September 11 attack to the invasion of Iraq.

In his 1956 paper, Hubbert wrote:

On the basis of the present estimates of the ultimate reserves of world petroleum and natural gas, it appears that the culmination of world production of these products should occur within a half a century (i.e., by 2006).

So get in your Hummer and take your last drive, Clive. Sometime during 2006, we will have used up every last drop of crude oil on the planet. We’re not talking “decline” in oil from a production “peak,” we’re talking “culmination,” completely gone, kaput, dead out of crude--and not enough natural gas left to roast a weenie.

In his 1956 treatise, Hubbert wrote that Planet Earth could produce not a drop more than one and a quarter trillion barrels of crude.

We obtain a figure of about 1,250 billion barrels for the ultimate potential reserves of crude oil of the whole world.

That’s the entire supply of crude that stingy Mother Nature bequeathed for human use from Adam to the end of civilization. Indeed, our oil-lusting world will have consumed, by the end of 2006, about 1.2 trillion barrels of oil. Therefore, by Hubbert’s calculation, we’re finished; maybe in the very week you read this book we’ll suck the planet dry. Then, as Porky Pig says, “That’s all, folks!”

But the pig ain’t sung yet. Planes still fly, lovers still cry and smog-o-saurus SUVs still choke the LA freeway. Why aren’t our gas tanks dry? Hubbert insisted Arabia could produce no more than 375 billion barrels of oil. Yet, Middle Eastern oil reserves remaining today total 734 billion barrels. And those are “proven” reserves--known and measured, not including the possibility of a single new oil strike or field extension. Worldwide, ready-to-go reserves total 1.189 trillion barrels--and that excludes the world’s two biggest untapped fields, which could easily double the world reserve. (One is in Iraq, the other we'll get to in Chapter 4.)

In all fairness to the Hubbert Heads, there’s a more sophisticated, updated version of Hubbert’s theory. This is where the “peak” concept comes in. In this version of the Hubbert scripture, we ignore his dead wrong prediction of total crude available and look only at the up and down shape of his curve, the “peak.” The amount of oil discovered each year, Hubbert posited, will stop rising by 2000, then will crash rapidly toward zero when we will have used up our allotted 1.25 trillion barrels.

We haven’t crashed or even peaked. Oil production has risen year after year after year and discoveries have more than kept pace. Nevertheless, like believers undaunted by the failure of alien spaceships to take them to Mars on the date predicted, Peak enthusiasts keep moving the date of the oil apocalypse further into the future. In the new, revisionist models of Hubbert’s prediction, the high point in the curve of discoverable oil on our planet will come in a decade or so. Though we have a reprieve, goes the new theory, still, we’re running out of crude, dude! There’s only another twenty years left in proven reserves! Oh, my!

“It’s true that there’s only twenty years’ supply left-and that’s been true for the last hundred years,” Lewis Lapham told me over a decent sauterne at Five Points....Lapham of Harper’s magazine is the only editor in the hemisphere with hard knowledge of the petroleum market, insight he inherited legitimately: His family helped found Mobil Oil, the back half of what is now ExxonMobil.

He asked, “Why in the world would oil companies, or any company, announce that there’s lots of its product out there? You’d bust your own market. It’s better to say the cupboard’s bare.” As Lapham noted, we have been “running out of oil” since the days we drained it from whales.

OPEC’s big headache before the war shut down Iraq’s fields was that there was way too much oil. We were swimming in it and oil prices stayed low. The last thing oil companies want is more oil from Iraq, any more than soybean farmers want more soybeans from Iraq. Increasing supply means decreasing price.

This war is about the oil, but what about the oil? The Hubbert Peaksters think they know. They are convinced that Dick Cheney in his bunker is panicked that the world’s supply of oil is about to run out, and so to Iraq we go, to seize the last of it. Here’s the flaw in that argument: To believe that George Bush and Dick Cheney hustled us into Iraq to open up that nation’s untapped bounty of petroleum is to believe that these two oil Texans in the White House are deeply troubled that the price of oil will rise unless they get us more crude. But Dick and George get a rise out of the rise.

Have we peaked? The planet is producing today twice as much as the maximum predicted in 1956 by the “Peaking Man.” But the political uses of holy-sh*t-we’re-running-out-of-oil! has yet to peak.

Indeed, Bush and Cheney are more than happy to allow others to promote Hubbert Peak hysteria in the public. “We need Iraq’s oil” is used as a good bogeyman to get the public behind an invasion that promises to get Americans a fill-up for the family gas guzzler for less than a hundred dollars. Anti-war progressives seized on the Hubbert humbug as proof that Bush’s invasion was a war of “Blood for Oil.” Nuns, professors and rock stars were outraged. But the average American thinks, Blood for oil? That’s a BARGAIN.

The Shell Game

Hubbert’s predictions may have been astonishingly wrong but his little forty-page research report is, nevertheless, astonishingly important in understanding the mindset of Big Oil.

Almost everything you need to know about Hubbert and the agenda behind his crucial 1956 study is contained on its cover page. The oil doomsday pronouncement is “Publication No. 95, Shell Development Company, Houston, Texas.” Hubbert was the chief Consultant on general geology for Shell Oil and his “end of oil” paper was presented to the Texas meeting of the American Petroleum Institute. All else flows therefrom.

Every once in a while the landlords of the planet have to remind us to be grateful for their services. In 1956 it was Shell Oil’s turn and Hubbert was their man for the job. It was not a happy time for the oilmen of Texas. Shell and the other Seven Sisters, as Big Oil was then known, faced a heck of a problem: crude was cheaper than dirt--$2.77 a barrel, that is, a nickel a gallon-and sinking. Worse, they were finding more of the stuff all over the planet, meaning prices would fall further.

In March of that year, Hubbert presented the solution to his fellow oilmen at the API in Houston. He unveiled this magical chart. [viewable here]

Look closely. When Hubbert spoke, oil reserves worldwide were zooming heavenward. Despite the tide of petroleum rising around us, Hubbert declared that oil discoveries in the USA had begun to peak “as recently as 1951 or 1952" and that the world’s reserves would follow not long thereafter. He didn’t need to wink. His oil industry audience understood what oil giant Shell wanted America to believe: Oil isn’t abundant, it’s a scarce commodity and therefore...

1. It’s too cheap--so oil companies should, for the public’s own good, raise the price to conserve this precious resource. 2. We need to find an abundant alternative to fossil fuel. 3. We need to protect our access to dwindling sources of crude, by force if necessary.

Shell Oil, through Hubbert, sought, successfully, to change the way America thought of oil’s price, alternatives to oil and access to oil.

PRICE: The problem of falling oil prices was solved for Shell, brilliantly, in four years, in 1960, by the creation of OPEC. On paper, OPEC was created by national governments. If oil companies had created this cartel to fix prices, that would have made it a criminal conspiracy--cartels are illegal. But when governments conspire for the same purpose, the illegal conspiracy turns into a legitimate “alliance” of sovereign states. OPEC’s government cover makes the price-fixing perfectly legal, and Big Oil reaps the rewards....

Have we peaked? Worldwide oil reserves continue to rise even faster than America and China can burn it. Since 1980, reserves, despite our binge-guzzling, have risen from 648 billion to 1.2 trillion barrels. Yet, weirdly, despite the rising flood of discovered crude, its price quadrupled between 2001 and 2005. Supply choked, yet there’s no peak in sight....

So please don’t slander Mother Earth and say she’s run out of oil when it’s man-made mischief to blame. Evil, not geology, has a chokehold on energy; nature is ready to give us crude at $12 a barrel where it was just a few short years ago.

Peak oil is a scam designed to create artificial scarcity and jack up prices while giving the state an excuse to invade our lives and order us to sacrifice our hard-earned living standards.

Publicly available CFR and Club of Rome strategy manuals from 30 years ago say that a global government needs to control the world population through neo-feudalism by creating artificial scarcity. Now that the social architects have de-industrialized the United States, they are going to blame our economic disintegration on lack of energy supplies.

Globalization is all about consolidation. Now that the world economy has become so centralized through the Globalists operations, they are going to continue to consolidate and blame it on the West's "evil" overconsumption of fossil fuels, while at the same time blocking the development and integration of renewable clean technologies.

In other words, Peak oil is a scam to create artificial scarcity and drive prices up. Meanwhile, alternative fuel technologies which have been around for decades are intentionally suppressed.

Peak oil is a theory advanced by the elite, by the oil industry, by the very people that you would think peak oil would harm, unless it was a cover for another agenda. Which from the evidence of artificial scarcity being deliberately created, the reasons for doing so and who benefits, it’s clear that peak oil is a myth and it should be exposed for what it is. Another excuse for the Globalists to seize more control over our lives and sacrifice more American sovereignty in the meantime.

The lies of artificial scarcity

The crux of the issue is that if oil was plentiful in areas in which we are being told by the government and the oil companies that it is not, then we have clear evidence that artificial scarcity is being simulated in order to drive forward a myriad of other agendas. And we have concrete examples of where this has happened.

Three separate internal confidential memos from Mobil, Chevron and Texaco have been obtained by The Foundation for Taxpayer and Consumer Rights.

These memos outline a deliberate agenda to gouge prices and create artificial scarcity by limiting capacities of and outright closing oil refineries. This was a nationwide lobbying effort led by the American Petroleum Institute to encourage refineries to do this.

An internal Chevron memo states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins."

The Memos make clear that blockages in refining capacity and opening new refineries did not come from environmental organizations, as the oil industry claimed, but via a deliberate policy of limitation and price gouging at the behest of the oil industry itself.

The Peak Oil theory maintains that world production of conventional oil will soon reach a maximum, or peak, and decline thereafter, with grave socio-economic consequences. Some proponents of the theory argue that world oil production has already peaked, and is now in a terminal decline [1].

Although, on the face of it, this sounds like a fairly reasonable proposition, it has been challenged on both theoretical and empirical grounds. While some critics have called it a myth, others have branded it as a money-making scam promoted by the business interests that are vested in the fossil fuel industry, in the business of war and militarism, and in the Wall Street financial giants that are engaged in manipulative oil speculation.

Regardless of its validity (or lack thereof), the fact is that Peak Oil has had significant policy and political implications. It has also generated considerable reactions among various interest groups and political activists.

While environmental and similar activists have used Peak Oil to promote more vigorous conservation and more energetic pursuit of alternative fuels, the oil industry and its representatives in and out of the government have taken advantage of Peak Oil to argue in support of unrestrained extraction of oil and expanded drilling in the offshore or wildlife regions.

Because of its simple logic and facile appeal, Peak Oil has also led many ordinary citizens, burdened by high fuel bills during periods of energy crisis, to support unrestrained or expanded drilling. According to a recent Rasmussen poll, 57 percent of Americans favor more offshore drilling. Misled and misplaced popular perceptions, in turn, play into the hands of the oil industry and their representatives to lobby for the lifting of the Federal ban on oil production in hitherto restricted regions.

Citing voter anger over soaring energy prices, Senator John McCain of Arizona, the Republican presidential nominee, recently argued that opening vast stretches of the country’s coastline to oil exploration would help America eliminate the dependence on foreign oil. "We have untapped oil reserves of at least 21 billion barrels in the United States. But a broad federal moratorium stands in the way of energy exploration and production," he said. "It is time for the federal government to lift these restrictions" [2].

Perhaps the financial giants of New York and London have benefited the most from the misleading implications of Peak Oil: “As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. . . . Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the tail that wags the dog,” points out William Engdahl, a top expert on energy and financial markets [3].

Just as Peak Oil plays into the hands of manipulative speculators and beneficiaries of fossil fuel, so too can it be used by the champions of unilateral wars and military adventures, as it implies that war power and military strength are key to access or control of the “shrinking” or “soon-to-be-shrinking” oil. It thus provides fodder for the cannons of war profiteering militarists who are constantly on the look out to invent new enemies and find new pretexts for continued war and escalation of military spending—that is, for the looting of the national treasury, or public money.

By the same token that Peak Oil can serve as a pretext for war and military adventures, it can also serve as a disarming or pacifying factor for many citizens who accept the Peak Oil thesis and, therefore, internalize responsibility for U.S. foreign policy every time they fill their gas tank. In a vicarious way, they may feel that they own the war!

Thus, Peak Oil serves as a powerful trap and a clever manipulation that lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby), and the main culprits behind the soaring energy prices (the Wall Street financial giants engaged in manipulative commodity speculation) off the hook; it is a fabulous distraction. All evils are blamed on a commodity upon which we are all utterly dependent.

Not only millions of lay-citizens, but also many scholars and academics have taken the bait and fallen right into this trap by arguing that recent U.S. wars of choice are driven primarily by oil and other “scarce” resources. More broadly, they argue that most wars of the future, like the recent and/or present ones, will be driven by conflicts over natural resources, especially energy and water—hence, for example, the title of Michael T. Klare’s popular book, Resource Wars [4].

As a number of critics have pointed out, this is reminiscent of Thomas R. Malthus’s theory of “scarcity” and “overpopulation.” Malthus (1766-1834), a self-styled British economist, argued that the woes and vagaries of capitalism such as poverty, inequality and unemployment are largely to be blamed on the poor and the unemployed, since they produce too many mouths to be fed, or too many hands to be employed.

In a similar fashion, Peak Oil implies that current crisis in energy (and other commodities) markets is to be blamed, in part, on less-developed or relatively poorer nations such as India and China for growing “too fast” and creating “too much” demand on “scarce” resources. (Similarities between the Peak Oil theory and the Malthusian theory of scarcity are further discussed below.)

Since around October last year, the price of crude oil on world futures markets has exploded. Different people have different explanations. The most common one is the belief in financial markets that a war between either Israel and Iran or the USA and Iran or all three is imminent. Another camp argues that the price is rising unavoidably because the world has passed what they call “Peak Oil”—the point on an imaginary Gaussian Bell Curve (see graph above) at which half of all world known oil reserves have been depleted and the remaining oil will decline in quantity at an accelerating pace with rising price.

Both the war danger and peak oil explanations are off base. As in the astronomic price run-up in the Summer of 2008 when oil in futures markets briefly hit $147 a barrel, oil today is rising because of the speculative pressure on oil futures markets from hedge funds and major banks such as Citigroup, JP Morgan Chase and most notably, Goldman Sachs, the bank always present when there are big bucks to be won for little effort betting on a sure thing. They’re getting a generous assist from the US Government agency entrusted with regulating financial derivatives, the Commodity Futures Trading Corporation (CFTC).

Source: oilnergy.com

Since the beginning of October 2011, some six months ago, the price of Brent Crude Oil Futures on the ICE Futures exchange has risen from just below $100 a barrel to over $126 per barrel, a rise of more than 25%. Back in 2009 oil was $30.

Yet demand for crude oil worldwide is not rising, but rather is declining in the same period. The International Energy Agency (IEA) reports that the world oil supply rose by 1.3 million barrels a day in the last three months of 2011 while world demand increased by just over half that during that same time period.Gasoline usage is down in the US by 8%, Europe by 22% and even in China. Recession across much of the European Union, a deepening recession/depression in the United States and slowdown in Japan have reduced global oil demand while new discoveries are coming online daily and countries like Iraq are increasing supply after years of war. A brief spike in China’s oil purchases in January and February had to do with a decision last December to build their Strategic Petroleum Reserve and is expected to return to more normal import levels by the end of this month.

Why then the huge spike in oil prices?

Playing with ‘paper oil’

A brief look at how today’s “paper oil” markets function is useful. Since Goldman Sachs bought J. Aron & Co., a savvy commodities trader in the 1980’s, trading in crude oil has gone from a domain of buyers and sellers of spot or physical oil to a market where unregulated speculation in oil futures, bets on a price of a given crude on a specific future date, usually in 30 or 60 or 90 days, and not actual supply-demand of physical oil determine daily oil prices.

In recent years, a Wall Street-friendly (and Wall Street financed) US Congress has passed several laws to help the banks that were interested in trading oil futures, among them one that allowed the bankrupt Enron to get away with a financial ponzi scheme worth billions in 2001 before it went bankrupt.

The Commodity Futures Modernization Act of 2000 (CFMA) was drafted by the man who today is President Obama’s Treasury Secretary, Tim Geithner. The CFMA in effect gave over-the-counter (between financial institutions) derivatives trading in energy futures free reign, absent any US Government supervision, as a result of the financially influential lobbying pressure of the Wall Street banks. Oil and other energy products were exempt under what came to be called the “Enron Loophole.”

In 2008 during a popular outrage against Wall Street banks for causing the financial crisis, Congress finally passed a law over the veto of President George Bush to “close the Enron Loophole.” And as of January 2011, under the Dodd-Frank Wall Street Reform act, the CFTC was given authority to impose position caps on oil traders beginning in January 2011.

Curiously, these limits have not yet been implemented by the CFTC. In a recent interview Senator Bernie Sanders of Vermont stated that the CFTC doesn't "have the will" to enact these limits and "needs to obey the law.” He adds, "What we need to do is…limit the amount of oil any one company can control on the oil futures market. The function of these speculators is not to use oil but to make profits from speculation, drive prices up and sell." While he has made noises of trying to close the loopholes, CFTC Chairman Gary Gensler has yet to do so. Notably,Gensler is a former executive of, you guessed, Goldman Sachs. The enforcement by the CFTC remains non-existent.

The role of key banks along with oil majors such as BP in manipulating a new oil price bubble since last Autumn, one detached from the physical reality of supply-demand calculations of real oil barrels, is being noted by a number of sources.

A ‘gambling casino…’

Current estimates are that speculators, that is futures traders such as banks and hedge funds who have no intent of taking physical delivery but only of turning a paper profit, today control some 80 percent of the energy futures market, up from 30 percent a decade ago. CFTC Chair Gary Gensler, perhaps to maintain a patina of credibility while his agency ignored the legal mandate of Congress, declared last year in reference to oil markets that "huge inflows of speculative money create a self-fulfilling prophecy that drives up commodity prices." In early March, Kuwaiti Oil Minister Minister Hani Hussein said in an interview broadcast on state television, "Under the supply and demand theory, oil prices today are not justified."

Michael Greenberger, professor at the University of Maryland School of Law and a former CFTC regulator who has tried to draw public attention to the consequences of the US Government’s decisions to allow unbridled speculation and manipulation of energy prices by big banks and funds, recently noted, "There are 50 studies showing that speculation adds an incredible premium to the price of oil, but somehow that hasn't seeped into the conventional wisdom," Greenberger said. "Once you have the market dominated by speculators, what you really have is a gambling casino."

The result of a permissive US Government regulation of oil markets has created the ideal conditions whereby a handful of strategic banks and financial institutions, interestingly the same ones dominating world trade in oil derivatives and the same ones who own the shares of the major oil trading exchange in London, ICE Futures, are able to manipulate huge short-term swings in the price we pay for oil or gasoline or countless other petroleum-based products.

We are in the midst of one of those swings now, one made worse by the Israeli saber-rattling rhetoric over Iran’s nuclear program.

Oil fell in New York for the second time in three days after France said industrialized nations are considering a release from strategic stockpiles and a report showed Chinese manufacturing may contract.

Futures dropped as much as 0.9% after French Industry Minister Eric Besson said the country is “studying with its partners all possible options,” including the supply of oil from emergency reserves.

Manufacturing in China, the world’s second-largest oil consumer, may decline for a fifth month in March, according to a preliminary report today from HSBC Holdings Plc and Markit Economics.

“The big story at the moment is the Chinese slowdown, the economy slowing down there and how that’ll have an effect on demand,” Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney, said in a Bloomberg Television interview.

Crude for May delivery slid as much as 92 cents to $106.35 a barrel in electronic trading on the New York Mercantile Exchange.

It was at $106.39 at 1:11 p.m. Singapore time. The contract gained $1.20 yesterday to the highest close since March 19. Prices are 7.8 percent higher this year.

Brent oil for May settlement on the London-based ICE Futures Europe exchange declined as much as 67 cents, or 0.5 percent, to $123.53 a barrel.

The European benchmark contract was at a premium of $17.15 to New York futures. The difference was $16.93 yesterday, the smallest in three weeks.

An index of China’s manufacturing may drop to a four-month low of 48.1 from 49.6 in February, according to HSBC and Markit Economics.

Brent was steady above $123 a barrel on Friday, as the possibility of supply disruptions put a floor under a market that fell sharply in the previous session on weak manufacturing activity in China.

The potential loss of Iranian crude supplies amid tightening Western sanctions and news that the International Energy Agency (IEA) was not planning to release reserves from strategic storage as of now also supported oil markets.

"The Iran situation has a long way to run and that will keep the market tight and support crude oil," said Tony Nunan, a risk manager with Mitsubishi Corp in Tokyo. "The market had fallen enough yesterday and trading will be locked in a range for now."

Brent crude rose 39 cents to $123.53 a barrel by 0758 GMT. The benchmark is set to fall 1.8 percent this week, after ending flat in the previous week.

U.S. crude was up 40 cents at $105.75 a barrel, and is poised for a 1.2 percent drop this week, its second straight weekly decline.

Oil rose on Friday to post the biggest quarterly gain since the beginning of 2011 as the growing threat of a disruption of Iranian exports added to supply concerns.

Brent May crude traded up 49 cents to settle at $122.88 a barrel. Prices were up $15.50 since the end of December, the biggest quarterly rise since the first quarter of 2011.

U.S. May crude settled at $103.02 a barrel, up 24 cents on the day and $4.19, and up over 4% from last quarter.

Despite the quarterly gains, Brent has traded mostly between $122 and $127 a barrel over the past five weeks, as traders balance supply losses against weak demand in the West and worries about the euro zone.

U.S. gasoline futures, which have been supported by the shutdown of East Coast refineries and the rising price of crude, rose 26% for the quarter -- the biggest quarterly gain since the same period in 2011.

Heating oil futures were up nearly 8% in the first quarter, despite the mild winter that damped demand.

Trading was light with Brent volumes 18% below the 30-day moving average and U.S. crude 33% below average.

Oil prices got an early boost on Friday when the euro edged up against the dollar and the yen as Spain's budget boosted hopes one of the euro zone's larger economies would tighten its belt.

A weaker greenback can lift dollar-denominated oil by making it less expensive for consumers using other currencies.

Gasoline prices continued their relentless upward move Friday, with the average retail price up about a penny in the last day to $3.93 a gallon, according to the AAA Daily Fuel Gauge Report.

A month ago, gasoline cost $3.73, and a year ago in the good old days, it cost $3.61 a gallon.

The rise continues even though oil supplies in the U.S. remain plentiful.

When asked about rising gasoline prices against a glut of crude, Tom Kloza of the Oil Price Information Service – the outfit that supplies the data for the AAA’s daily report — said one culprit could be the more costly refining process for making summer blends of gasoline.

He noted that wholesale gasoline prices “went ballistic” in the Chicago area last week as suppliers switched to summer blends of gasoline, designed to burn more cleanly to reduce smog levels during the intense heat of May, June, July and August.

After Chicago, price jumps are likely in the Northeast, the very place where some big refineries that make summer gasoline blends have been shuttered.

Kloza figures these areas may be facing a jump of 15 to 25 cents a gallon from current levels in the coming weeks.

“Smart people have wagered bets in the futures market that this summer, gas will be in tight supply,” Kloza said.

Already, U.S. officials have hinted they may tap in the Strategic Petroleum Reserve, which could bring short-term relief from gasoline prices ahead of this fall’s presidential election.

Experts say U.S, oil reserve release possible.

In the long run, increased use of biofuel and higher fuel mileage standards for cars may ease demand for petroleum, but for now, gasoline prices seem to be headed higher — at least until the start of the summer driving season in May.

Oil rose on Thursday after two straight days of losses, as a drop in U.S. jobless claims to near four-year lows and fears of Iran-related supply disruptions spurred a rebound from the previous session's heavy losses.

Data from the U.S. Labor Department showing first-time claims for state unemployment benefits fell to the lowest level since April 2008 gave U.S. prices an early boost, with further strength coming from short covering ahead of the three-day holiday weekend.

In recent months, new jobless claims have fallen sharply, boosting hopes that the end of a long stretch of heavy layoffs will lead to more hiring, ultimately boosting demand for motor fuel and other energy products.

Fears of supply shrinkage also helped push oil higher, highlighted by a note to clients from JPMorgan that Iran's crude oil production could fall 1 million barrels per day by the end of June to below 2.5 million bpd.

The reason is that refiners have cut oil demand from the Islamic Republic faster than previously expected, the bank said, ahead of a European Union embargo on Iranian that takes effect by July 1.

In London, ICE Brent crude for May delivery settled at $123.43 per barrel, up $1.09, climbing back from the session low of $121.82. For the week, the contract rose 55 cents, after three consecutive down weeks.

U.S. May crude settled at $103.31 a barrel, gaining $1.84, after climbing to the day's high of $103.40 in a late burst of short-covering. For the week, the contract rose 29 cents, ending three successive weeks of losses.

"The move higher on crude has also liquidated the gasoline crack, which hit a high of more than $40 yesterday, but has fallen to $36.75 today," added Tony Rosado, options broker ag GA Global Markets in New York.

Brent crude's premium against U.S. crude narrowed to $20.12 at the close, after hitting $21.72 on Wednesday, the widest since October, supported by U.S. government data showing oil stockpiles at the U.S. delivery hub in Cushing, Oklahoma, rose sharply last week to hit their highest level since May 21.

Total U.S. crude oil inventories jumped by more than 16 million barrels over the past two weeks, the biggest increase since March 2001.

The rise eased concerns about supplies after a string of outages from the North Sea, South Sudan, and Syria as well as the potential loss of Iranian exports due to U.S. and EU sanctions sent Brent prices up 15% this year.

Wednesday's oil futures slumped more than 2% as a result.

"With oil falling so sharply, traders simply grabbed WTI today, but upside movements on Brent and U.S. product futures were not as strong," said Tim Evans, energy analyst at Citi Futures Perspective in New York.

"Book squaring ahead of the long weekend and short-term technical support also figured in the day's trade," Evans added.

Thursday's Brent crude trading volume was down 4% while U.S. crude dealings fell 24%, both based on their 30-day average, according to Reuters data.

In early trade, supply disruption worries lifted prices on news that a major Chinese ship insurer will halt indemnity coverage for tankers carrying Iranian oil, a move that could seriously complicate Iran's oil exports before the EU embargo comes into force.

China is the top buyer of Iranian crude and the insurance move is the first sign Chinese refiners may struggle to obtain shipping and insurance coverage the4y nee3d to keep importing from OPEC's second biggest producer.

Japanese refiners also plan to cut crude imports from Tehran yet again in April as they shy away from renewing annual contracts.

Adding to supply worries, explosions had temporarily shut on Thursday both of the pipelines bringing about a quarter of Iraq's crude exports from Kirkuk to the Turkish port of Ceyhan on the Mediterranean.

News that a rocket fired from Egypt's Sinai desert struck the southern Israeli resort of Eilat on Thursday also fuelled the early rise in oil prices, traders said.

A report that Royal Dutch Shell will cut production from the Mars field, a major supplier of sour crude from the Gulf of Mexico, according to trading sources, also added to supply uncertainties, particularly for U.S. crude.

U.S. crude inventories rose by more than analysts' expectations last week, according to data released Wednesday by the U.S. Department of Energy.

Crude oil stockpiles rose 4 million barrels to 373 million barrels, compared with an average survey estimate calling for a 1.9-million-barrel increase.

The American Petroleum Institute, an industry group, reported a 985,000-barrel draw in its weekly report released late Tuesday.

Gasoline stockpiles fell by 2.2 million barrels to 211.7 million barrels, the department's Energy Information Administration said in its weekly report, compared with a 1-million-barrel drop forecast in a Dow Jones Newswires survey of analysts.

Distillate stocks, which include heating oil and diesel fuel, fell 3.1 million barrels to 125.9 million barrels, compared with analysts' forecast of a 100,000-barrel increase.

Demand for oil and other energy products continued to be weak, a tad lower on the week and down 3.2% on the year, said Tim Evans, an analyst with Citigroup’s Citi Futures Perspective, in a note to clients.

“Our base case assumptions for the second half of the year include bothstronger seasonal demand and lower [Organization of Petroleum Exporting Countries] production,” they said.

“This would be consistent with either a scenario where Iranian production declines moderately, or one where Iranian production stabilizes butother OPEC production is reduced to help limit a drop in price on an easing of tensions,” Citi said.

BASF expects prices to remain high, and possibly even to rise, depending on political developments in the Middle East, he said at the firm's annual general meeting.

Whether the company can pass on higher costs to customers will depend on how the economy develops, he said, adding this was only partially possible in the first quarter because of increased customer caution in several markets.

BASF's full-year forecasts are based on a Brent oil price estimate of $100 per barrel.

Oil production from Organization of the Petroleum Exporting Countries has climbed back to levels not seen since 2008, as Iranian supplies drop to their lowest since 1990, according to a report Monday.

April oil output from the 12-member OPEC averaged 31.75 million barrels per day, up from a revised 31.32 million, a Reuters survey of oil companies, OPEC officials and analysts released Monday showed, pegging it as the highest since September 2008.

The biggest supply increase came from Iraq, with production topping 3 million barrels per day, up 230,000 barrels per day from last month, the survey showed.

Meanwhile, industry sources outside of Iran indicated that output there fell to 3.15 million barrels per day in April, which would be the lowest Iranian output since 1990, the survey said, citing data from the U.S. Energy Information Administration.

The European Union announced an embargo on Iran in January that will take effect this summer.

“Most European imports have stopped or will by the end of June,” said James Williams, an energy economist at WTRG Economics, in his latest report.

The fall in Iranian supply comes with spare oil production capacity in OPEC on the decline.

The EIA estimates OPEC spare capacity at near 2.5 million barrels per day, down about 1 million from last year, Williams said, adding that there is no spare capacity outside of OPEC.

Iran has the capacity to export 2.2 million barrels per day and a “total halt” to Iranian exports would bring spare capacity below half a million barrels per day, he said.

OPEC's crude-oil output kept rising in April, as Iraq offset Iran's production decline to a 20-year low, according to a Dow Jones survey.

Crude production from the 12 members of the Organization of Petroleum Exporting Countries was up by 115,000 barrels a day from March, at 31.820 million barrels a day, according to a Dow Jones Newswires survey of industry sources and analysts.

The increase came despite Iran's production declining to its lowest level since 1990, at 3.2 million barrels a day, according to data from Vienna-based JBC Energy GmbH.

The Islamic Republic's oil sector is being hit by a combination of sanctions targeting both its fields and exports.

But other OPEC producers in the Persian Gulf have been able to offset the Iranian decline.

Iraq has reached its highest production in 20 years, at 3.060 million barrels a day, after opening a second offshore export terminal.

On a monthly basis, Iraqi production was up 193,000 barrels a day, the survey shows.

a. Dow Jones Newswires assesses OPEC output from data supplied by primary sources, traders and analysts. Totals may not add due to independent rounding of numbers.

b. At its Dec. 14, 2011, meeting in Vienna, OPEC agreed a new production ceiling of 30 million barrels a day applying to all members, but without individual quotas for each country. The new ceiling takes effect from January.

There are no short term measures that could address the current strength in oil prices, French oil major Total SA's Chairman and Chief Executive Christophe de Margerie said Thursday.

Asked about a potential use of strategic oil reserves, de Margerie declined to comment.

Earlier Thursday Maria Van Der Hoeven, executive director of the International Energy Agency, said the organization "stands ready to act if there is a major disruption" and alternatives aren't available.

Eric Besson, France's energy minister, also said "we are ready to intervene if necessary."

De Margerie said that unless geopolitical tensions abate around the world, and notably in the Middle East, "prices will remain too high."

In spite of several attacks over the past two months, which left one of its employees and one local soldier dead, Total remains committed to develop Yemen's gas field, de Margerie also said, adding he hopes a solution would be soon found to avoid Total's employees from being exposed to attacks.

As for the next Iraqi exploration round, de Margerie said he was still waiting to see the documents before reaching a decision on whether to bid.

World energy demand should grow 25% by 2030, mostly supported by the needs of emerging markets, French oil major Total SA's Chairman and Chief Executive Christophe de Margerie said Thursday.

Speaking at a Paris energy conference, de Margerie said that global oil production should increase to around 96 million barrels a day by 2020-2030, noting that fossil energies should still represent 76% of supply in 2030, in spite of the increasing tap into renewable sources.

As oil prices remain high, large investments are required to keep finding new reserves, to develop more fields even in extreme conditions, de Margerie also said.

Oil consumers could still tap into strategic stockpiles if needed, top energy officials said Thursday, after the scenario appear to lose momentum in the past month.

Speaking at a Paris energy conference, Maria Van Der Hoeven, executive director of the International Energy Agency, said the organization "stands ready to act if there is a major disruption" and alternatives aren't available.

Eric Besson, France's industry minister who is in charge of energy policy, said: "We are ready to intervene if necessary."

The scenario gathered steam in March when the U.S., U.K. and French governments said they were looking at releasing some of their strategic reserves, amid mounting fears over loss if supply from Iran.

But the plan lost some of its momentum.

Gulf producers boosted output and filled up commercial inventories while an adviser to Francois Hollande, seen as the likely winner in French presidential election, says he opposes such measure.

Van Der Hoeven, whose organization represents some of the world's largest consumers, said a release should only be used as a last resort.

Kuwait Gulf Oil Co. plans to increase its oil production by 100,000 barrels a day to 350,000 barrels a day by 2014-15, state-run Kuwait News Agency, or KUNA, reports Monday, citing the company's chairman and managing director.

The unit of Kuwait Petroleum Corp. is also aiming to increase gas extracted from oil fields to 500 million feet during the same period, Hashem al-Rifaee said, without giving comparative figures, according to KUNA.

KGOC's target is part of KPC's plan to raise OPEC member Kuwait's output to 4 million barrels a day from the current 3 million barrels a day by 2020.

The firm is also involved in several exploration and development ventures for the extraction and treatment of oil-linked gas as part of a wider plan to secure 400 million cubic feet of gas by 2020 and 500 million cubic feet by 2030, he added.

A leak on Royal Dutch Shell PLC's Bomu-Bonny oil pipeline in Nigeria has been spilling around 150 liters of crude oil a minute since Monday morning, a local community member said.

"Another serious oil spill occurred four hours ago on the pipeline, approximately 200 meters south of the Bomu manifold. About 150 liters of oil is oozing out every minute," said the community member Monday.

The manifold is located on the Bomu-Bonny Trans-Niger pipeline, which normally carries around 120,000 barrels a day. It is unclear if oil transit has been disrupted by attempts to stop the leak.

Shell Petroleum Development Company of Nigeria Ltd. is "investigating reports of a leak on a section of the Trans-Niger Pipeline at K-Dere in Ogoniland," a Shell spokesman said.

According to the community member, an SPDC remediation team working in the area has arrived at the scene to address the leak.

IntercontinentalExchange Inc. said it recorded record volume in ICE Brent Crude options of 78,508 contracts on Thursday.

The volume level broke the old record of 63,494 on May 2.

The regulated futures exchange, which also handles transactions for clearing houses and over-the-counter markets, said growth in trading in Brent crude has been driven by "rising demand for risk management in regulated energy futures markets."

A European Union ban on Iran's oil from July could have major consequences for European oil companies in Asia, as little-understood provisions in the sanctions law could see them facing investigation despite their best efforts to stay legal.